My current income puts me right on the threshold of being able to fully fund my Roth IRA. My expected bonus will put me well beyond the income limit even with the standard deduction.

I'm expecting this current situation to be the norm going forward for the next 2-4 years before fully phasing out of Roth IRA eligibility.

I'm currently funding my Roth IRA with a monthly contribution.

Should I switch the contribution to a traditional IRA now? What about a backdoor Roth IRA contribution?

I currently have both types of IRA accounts as I had to do a re-characterization of a portion of my Roth last year.

Just do backdoor every year, regardless. Makes everything easier. Congrats on the raise/bonus!

VaterAg said:

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File5 said:

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Just do backdoor every year, regardless. Makes everything easier. Congrats on the raise/bonus!

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Since the OP already has existing IRA, doing a back-door Roth contribution will be subjected to the pro-rata rules. I would personally avoid this head-ache.

Is your 401k/hsa fully funded? If you no longer can contribute to Roth based on income levels, I'd suggest 401k/hsa gets those funds if they're not already fully funded.

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Wait till you file your taxes before continuing to contribute to your Roth from now on if you are close to the phase range. You have until the normal filing date to fund the previous years IRA.

Depending on your age and what you invest in, switching to traditional IRA might not make much sense vs just keeping it in a brokerage account. If your income is too high to directly contribute to a Roth, it's too high to take the deduction on a traditional IRA contribution. So yes you can make a non deductable contribution to an traditional IRA and have it grow tax free but will be giving up the favorable long term captial gains rates (gains will eventually be taxed as ordinary income rates on the way out) and now have to start tracking basis in your traditional IRA. Unless you are frequently trading or investing in something that kicks off lots of non qualified dividends it's likely a losing battle.

Yep great point - very important to not have a Trad IRA balance for back door Roth. One of those things you really need to plan for from the very beginning to save headaches later. But if he is early ish career and to make this much in the long term then short term pain may be the way to go. OP should also look into mega backdoor Roth availability with their employer's plan. After company match/HSA/regular backdoor

Can you defer any bonus that would put you over the limit? If so, then could contribute every other year

Thanks for all the tips!

The amount in my regular IRA account is less than $4k. Should I take the hit on the pro-rata rule now if my 401k doesn't allow a rollover? Or does the IRS look at both types of IRAs and their value.

Assuming option A is attempt the rollover into my 401 and option B is take the pro-rata hit.

Do you guys participating in the backdoor conversion manually do it every disbursement or?

It's almost like you want to make the full allowed contribution on January 1st and make the backdoor conversion once the funds clear and forgot about it for the rest of the year.

If I were in your shoes, I'd go ahead and take the pro rata hit.

I'm at the point where taking the pro rata hit on my rolledover/trad IRA would suck way too much, so I've been maxing out my 401k, HSA, and my taxable brokerage instead.

When I get my next promo, I'll put those incremental extra funds into post tax mega backdoor with my 401K plan instead. But I need to get promoted first